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Save big bucks: Consult Labor Dept. before denying overtime

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in Employment Law,Human Resources,Leaders & Managers,Management Training

Violate the Fair Labor Standards Act (FLSA) at your peril. If you incorrectly classify an employee as exempt and refuse to pay overtime, you face a possible three-year willful violation statute of limitations—plus the possibility a court will double what you owe.

Before you decide an employee is exempt, consult the U.S. Labor Department or a qualified employment law attorney. The department regularly issues “opinion letters” that offer guidance on how to classify different kinds of employees.

Being able to demonstrate that you sought a relevant opinion letter probably will be enough proof of good faith that you can avoid paying double.

Recent case: Lorenda Rodriguez and 26 other former “managers” of Farm Stores drive-through grocery stores filed an overtime lawsuit against the company. They claimed that they should have been classified as hourly employees entitled to overtime. The company said they were store managers who met the executive exemption because their primary duty was management and they regularly directed the work of two or more employees.

The former managers testified that they spent most of their time waiting on customers and had very few supervisory duties.

A jury ruled that they were hourly employees entitled to overtime. Farm Stores appealed and argued that it had acted in good faith when it classified the managers as exempt.

But the 11th Circuit Court of Appeals refused to overturn the jury verdict. It reasoned that if the company really had wanted to make sure their classification was correct, it could have used a safe harbor—by asking the Labor Department for clarification. (Rodriguez et al., v. Farm Stores Grocer, No. 06-13186, 11th Cir., 2008)

Advice: To learn more about Labor Department opinion letters and how the process works, visit www.dol.gov/esa/whd/opinion/opinion.htm. Obtaining a Labor Department opinion letter dealing with just one or two employees is probably too expensive and time-consuming to be worthwhile. But an attorney can help you sift through the hundreds of existing letters accessible through the department’s web site. One may well apply to your situation.

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